Extra payday might give you even more reason to celebrate
Some workers enjoyed a little extra money this month.
No, it's not a raise. But it is some extra cash for the month.
Here's the simple explanation. People who get paid every two weeks probably plan their budgets with the assumption that they'll have two paychecks every month to cover the rent, utilities and other bills. But in two months every year, those people get a little bonus: a third paycheck. If you got paid October 30, this is one of your lucky months.
Of course, this doesn't add to your total pay for the year. "It's fooling yourself in a positive way," says Jamie Kalamarides, head of Institutional Investment Solutions at Prudential Retirement.
But if you aren't relying on the cash to pay November's rent, you should now find yourself with a small pile of cash to spend as you wish.
Here are some ideas on how to make the most of your new-found cash:
Pay down debt. Use the money to pay off a chunk of credit card debt, or pay down the principal on your car loan, or to make an extra mortgage payment. The higher the interest rate, the more sense it makes.
Boost your emergency fund. Still don't have your emergency savings exactly where you want them to be? Add this check to your fund and you now have another half a month's worth of expenses stashed in the bank. (Give or take.)
Save for retirement. Most workers can put up to $5,500 a year into an IRA or a Roth IRA. (That goes up to $6,500 for people ages 50 and up.) If you don't have an IRA, but have a 401(k), then boost your contribution rate for that. The move could grow your cash pile even more by lowering your tax bill. For a person in the 25 percent tax bracket, adding another $1,000 to an IRA or 401(k) is essentially the same as getting a check for $250.
Go shopping. The holidays are around the corner. Instead of taking on debt to buy gifts for your children and other relatives, convert this cash into your shopping fund. If your check is for $1,000, make that your budget for holiday shopping. If the check isn't enough to pay for travel and gifts, make this the start of your fund and add to it over the next several weeks.